54.7 F
Laguna Hills
Tuesday, Mar 19, 2024
-Advertisement-

Sabra Puts $97.5M Into Diversification Plan

Irvine-based Sabra Health Care REIT Inc. put close to $100 million behind its plans to diversify beyond its seminal tenant.

The latest move by the healthcare real estate investor is $97.5 million in deals for four separate nursing homes in Delaware.

Sabra split off from Irvine-based nursing home operator Sun Healthcare Group Inc. in November. The move put Sun’s 86 nursing homes in 19 states and other properties under Sabra, which leased them back to Sun.

Sabra has laid out plans to grow its portfolio beyond Sun and the deal in Delaware is the latest step in that direction.

In a federal filing, Sabra said that it bought Broadmeadow Healthcare, Capitol Healthcare, Pike Creek Healthcare and Renais-sance Healthcare from four different sellers.

The deals are expected to close in the current quarter.

“They’re beautiful—three of the facilities are almost brand new,” Chief Executive Richard Matros said in an interview. He called the buildings the “premier rehabilitation, skilled nursing and long-term care facilities in the Mid-Atlantic region, with an excellent management team.”

Cadia Rehabilitation, a Kennett Square, Pa.-based company, operates the four nursing homes.

Sabra also is raising more money. Last week, it submitted a filing with the Securities and Exchange Commission to offer up to $172.5 million of its common stock to help “build up our war chest,” Matros said.

A date for the offering hasn’t yet been set. Matros said it could happen sometime between “the next couple of weeks” and the end of summer.

Sabra plans to use proceeds from the offering to help pay for the nursing homes in Delaware, although the stock offering “is not conditioned on the consummation” of those deals or needed to complete the acquisitions.

The Delaware deal would bring the percentage of Sabra’s portfolio that’s leased to Sun down to 79%.

Reducing reliance on Sun makes it easier for Sabra to borrow money for more deals, Matros said.

“At some point, we’ll go out and redo our (revolving credit line), and the new revolver will be at a lower cost because we’ve demonstrated the ability to grow the company and decrease our risk of just being with one tenant,” he said.

Medicare

Sabra “took into careful consideration the current Medicare reimbursement environment,” according to Matros.

Earlier this year, the Centers for Medicare and Medicaid Services proposed two possible changes to how it pays nursing homes, including one that could result in an 11.3% Medicare rate cut for nursing homes starting Oct. 1.

The other method would provide a 1.5% rate increase.

Sabra began to add to its initial portfolio several months ago with an $80 million buying spree of three healthcare buildings in Texas and Michigan.

It closed a $62.7 million buy of the Texas Regional Medical Center, a 70-bed hospital in a Dallas suburb, in early May.

Sabra spent $11.3 million for the Oakbrook Healthcare Center, a 120-bed nursing home, just outside of Dallas. It also acquired an 82-unit assisted living, independent senior living and memory care building in Ann Arbor, Mich., accepting what’s called a “deed-in-lieu” of a foreclosure. It lined up a new tenant to run the operation.

Wall Street looks upon Sabra favorably.

“We believe Sabra has strong external growth prospects, as there is a dearth of nursing home buyers, particularly of smaller portfolios, such as those Sabra seeks,” said Robert Mains, a healthcare service analyst with Memphis-based investment bank Morgan, Keegan & Co.

Morgan Keegan expects Sabra to make buys “in the $30 million to $100 million range,” Mains said in a research note. “While deals this size are the fish that Sabra’s larger peers throw back in the water, they can meaningfully move Sabra’s earnings.”

Sabra, with revenue of some $26.4 million since its separation from Sun last November, competes against much larger healthcare real estate investors. Those include Ventas Inc. of Chicago, which recently completed a $7.6 billion buy of Nationwide Health Properties Inc., previously based in Newport Beach; Long Beach-based HCP Inc., also previously based in Newport Beach, and Health Care REIT Inc. of Toledo, Ohio.

Cash, Credit

Earlier, Matros said that Sabra started its independent life with “a pretty healthy amount of liquidity to make deals.” The company had $80.2 million in cash and cash equivalents, and had $87.6 million available to borrow on its credit line as of the end of the first quarter.

Want more from the best local business newspaper in the country?

Sign-up for our FREE Daily eNews update to get the latest Orange County news delivered right to your inbox!

-Advertisement-

Featured Articles

-Advertisement-
-Advertisement-
-Advertisement-
-Advertisement-

Related Articles

-Advertisement-
-Advertisement-